The US Q3 GDP report isn't even out yet but expectations that the data will confirm that the US economy climbed out of recession has drawn out signs of renewed risk appetite this morning. The USD and the JPY have lost ground against the usual line up of high yield currencies including the AUD, CAD and NZD and the GBP. EUR/USD is edging higher having briefly dipped below the 1.4700 level overnight.
This morning's release of the Eurozone confidence data will have put some support under the improvement in risk appetite. The economic sentiment indicator rose to a one year high which lends weight to the perception that the Eurozone recovery remains in place into Q4. Surprisingly good German unemployment data was also favourable (-26K in Oct). While German government subsidies to keep jobs in place has reduced the market impact of the unemployment series, last weekend's commitment by the German government to 'growth' over the budget deficit suggests that the expected increase in German joblessness into 2010 will continue to be dampened.
UK data this morning offered little fresh direction. Stronger than expected UK lending on dwellings (GBP56.2 bln) highlights the stability noted in other housing market indicators. The final print of Sep M4 at +0.8% m/m brought a modest upward revision but the series is still insufficiently strong to judge that the impact of QE to date has been substantial. This strengthens the case for more QE at next week's MPC meeting. The worse than expected decline in net consumer credit in Sep (-0.3% m/m) suggests that UK consumers are in the throes of repairing their balances sheets, a factor which will hinder consumption levels going forward. EUR/GBP has edged moderately lower this morning in tune with the improvement in risk appetite.
Risk appetite has also allowed the NZD to regain is poise this morning. NZD/USD was hit overnight by a more dovish than expected statement from the RBNZ. As expected the RBNZ left interest rates unchanged. What surprised the market is that the RNBZ maintained in its statement the phrase ''we expect to keep the OCR at the current level until the second half of 2010''. Expectations had been growing that the RBNZ may bring forward a rate hike.
Following yesterday's Norges Bank rate hike, Norwegian retail sales printed a weaker than expected +2.0% y/y this morning. This, however, is a very volatile series. EUR/NOK is lower on the day in tune with the better tone in risk appetite.
Aside from the US GDP data, initial claims are due.
